Summary:
Arch Coal witnessed another lackluster quarter as milder summer
temperature lowered demand for thermal coal. Arch's loss of 41
cents in the third quarter was wider than Zacks Consensus Estimate
while top-line marginally surpassing the same. Going into the
winter months, Arch Coal expects higher seaborne coal demand for
power generation. Arch coal currently has no debt maturities until
mid-2018 and hence it provides some financial flexibility to the
company to find a way through current coal market downturns.
However, the new EPA regulation might see shut down of domestic
coal plant lowering demand for thermal coal. Currently, the low
global coal prices and reduction of U.S. coal export opportunity
due to supply glut in global coal market might have an adverse
impact on the future prospects of the company. Hence, we retain our
Neutral recommendation on the stock.

Overview:

St. Louis, Mo.-based Arch Coal Inc. (ACI) is one of the largest
coal producers in the U.S., operating 22 mines across major coal
basins of the country. The company serves customers in over 20
countries. Arch Coal sells coal to power plants, steel mills and
industrial facilities under long-term contracts. The company also
owns a 42% interest in Knight Hawk Holdings, a coal producer in the
Illinois Basin.

Arch Coal primarily conducts its business through three
operating segments: Powder River Basin (PRB), having operations in
Wyoming Appalachia (APP), having operations in Kentucky, Maryland,
Virginia and West Virginia and Other, having coal mining operations
in Colorado and Illinois.

Coals mined from the PRB region have very low sulfur content and
low heat value. Bituminous coals usually have a low sulfur content
and varying heat value. Appalachia produces coals, which have low
sulfur content and high heat value. Metallurgical (met) coal has
low sulfur content, high heat content, low expansion pressure and
several other chemical properties.

During 2013, Arch Coal sold 140.7 million tons of coal,
including around 2.8 million tons of coal sourced from third
parties. At year-end 2013, the company had roughly 5.3 billion tons
of met and thermal coal reserves.